IRS IG: Digital services plan needs a rework

Another IRS watchdog is calling on the agency to re-examine how it’s overhauling its online systems.

The Treasury Inspector General for Tax Administration released a report Wednesday calling on the IRS to examine how it prioritizes its Service on Demand initiative, which is aimed at improving how taxpayers interact with the agency online. Of the 71 projects tied to the initiative, the inspector general says the IRS has not given enough attention to features that would provide “dynamic online account access.”

The audit found that Service On Demand has 12 projects related to improving taxpayers’ ability to manage their accounts online, but five of those 12 aren’t among the initiative’s top 20 priorities. Among those five, three involve tax-related identity theft: online reporting of identity theft, online access to identity theft case status and online ability to lock tax account.

The IRS has been marred with recent cases of tax-related identity theft. This past tax season, 100,000 taxpayer accounts were breached through the agency’s “Get Transcript” application.

The report goes on to say if the IRS is up to speed on its work with Service on Demand, it needs to focus on three pillar projects: online account activity, e-authentication and digital communication. This would allow taxpayers to review their entire tax profile on the IRS website, provide identity authentication and give people the chance to correspond with the agency through IRS.gov.

While Service on Demand has been in motion since 2013, IRS Commissioner John Koskinen announced last October his own plan to modernize tax services over the next three to five years. The report says Koskinen’s plan needs to be aligned with Service on Demand if the agency is to see any kind of timely success.

“The Commissioner envisions a system in which taxpayers can log into their accounts online, read posted information, and make additions or corrections immediately – without waiting on telephones, going to IRS office appointments, or using the United States Postal Service,” the report reads. “By not aligning project prioritization with the Commissioner’s vision, the IRS may further delay providing taxpayers and tax professionals with more robust online service.”

The IRS agreed with the report’s findings, but it noted that work related to the pillar projects has already started and the agency’s funding will continue to be a barrier in promptly completing projects.

The inspector general’s report is the second in the past few days that has called on the IRS to quickly upgrade its citizen-facing services. Last week, the Electronic Tax Administration Advisory Committee — a nine-person oversight committee of private sector tax experts — called on the agency to devote more time and effort to modernizing its digital services in its yearly report to Congress.

Read TIGTA’s full report below.